Capital Gains Tax

What is Capital Gains Tax?

Capital Gain is simply the profit received from the sale of a property or an investment.

Capital gains tax is the tax you pay on the profit of such an asset (could be anything from a painting to an apartment). It’s always the money that you make rather than what you receive, so it’ll be the increase that is taxed only.

The Capital Gains Tax you pay is dependent on your Income Tax rate.

What do you pay it on?

Some investments are tax-free.

Things that would be liable for capital gains tax, also known as ‘chargeable assets’ include:

  • Personal possessions worth £6,000 or more (not including your car)
  • Shares that aren’t in an ISA or PEP
  • Business belongings
  • Property that isn’t your main home
  • Your main home if it’s rented out, used for business or is a large asset

When don’t you pay it?

You’re only expected to pay Capital Gains Tax on your total gains above an annual tax-free allowance (typically £11,700).

You also, typically, don’t pay Capital Gains Tax on gifts to your husband/wife, civil partner or a charity organisation. Although if the gifts are later sold on, Capital Gains Tax may need to be paid.

If you inherit an asset, the estate of who has died usually pays Inheritance Tax, so you’ll only need to worry about paying Capital Gains Tax if you decide to dispose of/sell the asset on.

How to pay it?

You can either report any Capital Gains Tax you owe using a ‘real-time’ Capital Gains Tax service (you’ll need to set up a Government Gateway account, but you can do online), or annually in a Self Assessment tax return form (if you haven’t done it before, you’ll need to register here).

You’ll need to have prepared in PDF docs

  • Calculations to prove
  • Info on the cost for each asset, and what profit you made
  • Details of any reliefs (or similar) you’re entitled to

When to submit?

You have to send your documents and proof by 31st December after the tax year when you had the gains. No later. Please note, typically you will have to pay a penalty if you send your tax return late or miss a payment or send information that isn’t accurate.

Once submitted your details, HMRC will get back to you with how much you owe.

Info sourced from the Government website, click here for more info.